How will Costa Rica vote on trade?

Costa Rican voters are deciding in a referendum today whether to participate in a U.S.-led regional trade agreement, CAFTA. Proponents tout the benefits on enhanced market access in the U.S., while opponents fret about provisions that will require changes in domestic regulations (in telecomms and insurance in particular), increase rights of U.S. investors, tighten intellectual property rules, and open up domestic agricultural markets. Here is a detailed summary of the agreement.

I have been a critic of these regional agreements in the past because their benefits tend to be greatly oversold. The additional market access you get is generally not worth the restrictions on your policy space that you have to accept. Developing countries have tended to sign on to these more for their signaling value ("we are a nice country and open for business") than for the direct economic gains. If NAFTA has proved such a disappointment for Mexico, it is hard to imagine that CAFTA will do a great deal for the development prospects of these countries.

Cost Rica is a long-standing democracy that rightly prides itself in its social arrangements and the quality of its polity. I do not know enough to have a strong view as to whether CAFTA is good or bad for this country. But I am happy that there is a referendum on the subject. Let the people decide.

Comments

[Per Kurowski]

I totally agree with your comment. Unfortunately some of the current difficulties with approving CAFTA in Costa Rica have less to do with the economics of it and more with political considerations, it is more anti Bush than anti CAFTA, much the same way the negotiations on CAFTA had more to do with political considerations than with gaining access to real economic benefits. It is always sad when politics gets into the way of opportunities. If CAFTA is now to be rejected by Costa Rica let us hope people do so because of CAFTA.

I copy below an extract from my “Voice and Noise” of an informal memo I sent to my colleagues at the World Bank, while an Executive Director… among other countries for Costa Rica

Get moving!

Dear Colleagues,

While getting closer to the Central American economies, I realized that the recently signed free-trade agreement with the United States of America, CAFTA, did not carry sufficient punch to deliver the much expected economic growth, if it was to focus primarily on agriculture and manufacture.

But, by 2030 there will be around 80 million citizens in the United States of America and Canada who are over 65 years of age and also, by 2005, the United States government has predicted a shortage of 250.000 nurses. If Central America could somehow be made to provide healthcare and housing to only 1% of these elderly citizens as well as supply 100.000 bilingual certified nurses, to work either abroad or in their own country, then we could perhaps bring real prosperity to this poor subcontinent. Besides, would this not be the most constructive way to release the ever growing tensions around many immigration issues?

In discussing the issue with authorities and representatives of the private sector in the region, I sensed that there is a growing realization that their growth opportunities lie in finding ways to develop the Service Sector intelligently. Some of their initial thinking has revolved around the following aspects:

The Third & Fourth Age Service Markets are in for tremendous growth, because of baby-boom demographics and increased length of life. As the fiscal systems of most developed countries will evidently not be able to deliver on all the social promises made and expected without generating new cost efficiencies, this situation creates many interesting opportunities to offer many new service products of the highest standards. Doing so would require from the host governments to take concerted and supportive actions on many fronts, such as, for example, guaranteeing the adequacy of visa procedures and tax exemptions.

International credits for retirement homes. Clearly the financial markets of most developing countries are not deep enough to service any important demands of financing. Unfortunately the banking regulations coming out of Basel make it extremely onerous for banks in developed countries to finance foreign homes. Some discussions with international agencies have been initiated in order to design those instruments needed to overcome these obstacles, for instance, the issuance of some guarantees against political risk, such as expropriations.

Bilingual Licensed Nurses. If their education programs focused more directly on professions like that of the nurse who can speak a foreign language and who is sufficiently qualified to be licensed in a developed country, this would clearly support the quality of the services offered.

Friends, when do we get moving?

Per

[Barkley Rosser]

Has not the biggest problem with NAFTA for Mexico been the weird inequality whereby the US could continue to subsize its corn/maize industry while Mexico could not (or at least did not)? This led to a massive outpouring of labor from the maize producing ejido sector in Mexico, which depressed industrial wages, contrary to many forecasts made about the effects NAFTA would have (with this wage depression further stimulating migration to the US).

[wjd123]

I read CAFTA with an eye to finding the provision that condemns poor Costa Ricans to continued sickness or possible death because they won't be able to get generic medicines. The reason being that the patents of pharmaceutical medicines which have expired in the United States will be reinforced in Costa Rica at the time of the CAFTA signing. Generic medicines won't be available to Costa Ricans until reinforced patents run their course in CAFTA countries that didn't sign off on the original patent..

I wanted to see how lawyers would write up death warrants for the poor. This is what I found or think I found. Talk about hiding the truth. No words have ever slipped the knife into the poor so stealthily:

"General Provisions. Under Chapter Fifteen the Parties are obligated to ratify or accede to
several agreements on intellectual property rights, including, by the date of entry into force of
the Agreement, the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty,
and, within specified time frames, the International Convention for the Protection of New
Varieties of Plants, the Trademark Law Treaty, the Brussels Convention Relating to the
Distribution of Programme-Carrying Satellite Signals, and the Patent Cooperation Treaty. The
United States is already a Party to these Agreements. National treatment requirements apply
broadly....

"Certain Regulated Products. Chapter Fifteen includes specific measures relating to certain
regulated products, including pharmaceuticals and agricultural chemicals. Among other things,
it protects test data that a company submits in seeking marketing approval for such products by
precluding other firms from relying on the data. It provides specific periods for such protection
– five years for pharmaceuticals and ten years for agricultural chemicals. This means, for
example, that during the period of protection, test data that a company submits for approval of a
new agricultural chemical product could not be used without that company’s consent in granting
approval to market a combination product. The Chapter also requires Parties to implement
measures to prevent the marketing of pharmaceutical products that infringe patents."

My suggestion is that some enterprising lawyers or law students rewrite agreements like CAFTA in the language of the streets spelling out in detail the consequences of each provision to the poor. Call it CAFTA for the people.

[wjd123]

This is what the summary of CAFTA says about agricultural subsidies.

Why don't I believe it? Where is the catch?

"Export Subsidies. Each Party will eliminate export subsidies on agricultural goods destined for another CAFTA-DR country. Under Article 3.14, no Party may introduce or maintain a subsidy on agricultural goods destined for another Party unless the exporting Party believes that a third country is subsidizing its exports to that other Party. In such a case, the exporting Party may initiate consultations with the importing Party to develop measures the importing Party may adopt to counteract such subsidies. If the importing Party agrees to such measures, the exporting Party must refrain from applying export subsidies to its exports of the good to the importing Party."

[Dora Carías]

I am a Costa Rican, and I was honored to be a part of the historic referendum, especially to be on the side of those who fought against the CAFTA. Unfortunately, although on the outside the referendum seems like a very democratic instrument to decide on public policy, money, power and corruption will inevitably tarnish even these processes. The side which promoted the CAFTA, represented by a very economically and politically powerful group had millions of dollars at its disposal to create superficial and 'dumbing' propaganda for people to vote in favor of the CAFTA. The Costa Rican media also sided with the 'YES', and helped bombard the population with propaganda disguised as 'news'. Until Thursday October 4th, the anti-CAFTA had been successful in convincing people that this trade agreement is bad for most of the population, and that it benefitted only a small exporting sector and multi-national corporations in search of cheap labor and natural resources. Unfortunately, it was at this key moment that all of the additional resources at the disposal of the YES made a difference. When they realized that the No was about 12% points ahead of the yes, they disrespected the 'truce' established by the Electoral Tribunal in which for 3 days there would be no propaganda in favor of ANY side, and asked George W. Bush and Susan Schwab to write a letter to Costa Ricans informing them that the CAFTA could not be re-negotiated and that the benefits of the Caribbean Basin Initiative were in jeopardy. This was used by the media as 'news', and was thrown at Costa Ricans for three consecutive days. The media was less interested in communicating what democrats in congress had stated, that Bush does not have the power to remove the ICC and that Democrats would be more than willing to renegotiate a CAFTA which is beneficial for both parties. The rest is history.

I am proud of what the anti-CAFTA was able to do. It is a movement of the people, it does not have clear 'leaders', and with a fraction of the resources at the disposal of the pro-CAFTA, it lost by less than 50.000 votes. I would say this was a battle of David vs. Goliath, and although David 'lost' (if you can call purchased votes and winning through scare tactics 'winning')I think he did a pretty commedable job. It is now our hope that the Patriotic committees which were born out of the people's concern of the CAFTA's impact on the country's poor and its government institutions, will continue to grow and strengthen. It was good to realize that those of us who want fair trade and more equal relationships between countries are not just a few. We are many and we will countinue to grow, I believe, as people realize the negative social effects of these trade agreements.

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